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Consider a $100,000 line of credit with a 10% compensating balance requirement. The quoted rate on the line is prime + 7%, and the prime

Consider a $100,000 line of credit with a 10% compensating balance requirement. The quoted rate on the line is prime + 7%, and the prime rate is currently 5%. Suppose the firm wants to borrow $220,000 (a) How much do they have to actually take a loan from the bank? (1.5 marks) (b) What is the effective annual rate? (0.50 mark)

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